'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/255/original/2020-06-11_08-36-54.png?1591832240" class="editor-image img-responsive" data-smartkarma-image-id="139255"></figure><div class="content-caption">Source: Japan Analytics</div>STRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through the current euphoria and assess where business risk is concentrated among larger Japanese companies. According to Tokyo Shoko Research, 171 listed Japanese firms have raised nearly ¥10 trillion in new funds to weather COVID-19.ALTMAN Z-SCORES - The first Insight will update our earlier Who's<a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-2-altman-z-score" target="_blank" data-smartkarma-citation="insights:37316" rel="noopener"> Swimming Naked?</a> Insight and focus on the Altman Z-Score as updated for the most recent quarterly results for both manufacturing and non-manufacturing companies.  In each category, ee will look at both the companies that are below Altman's 'distress' levels and those companies that have the most significant negative deviation from their seven-year average score. Only six of the bottom-thirty manufacturing and five of the bottom-thirty manufacturing companies have outperformed over one year. Many are already Oversold and offer potential value opportunities -as with <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)</a> which is now as distressed as when Carlos Ghosn first arrived.  QUASI-FINANCIAL FIRMS - The Z-Score methodology does not work for financial firms. Accordingly, five non-financial companies which have significant financial subsidiaries -  <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>, <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP)</a>, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>- have been excluded from this analysis.

Source: Japan AnalyticsSTRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through the current euphoria and assess where business risk is concentrated among larger Japanese companies. According to Tokyo Shoko Research, 171 listed Japanese firms have raised nearly ¥10 trillion in new funds to weather COVID-19.ALTMAN Z-SCORES - The first Insight will update our earlier Who's Swimming Naked? Insight and focus on the Altman Z-Score as updated for the most recent quarterly results for both manufacturing and non-manufacturing companies.  In each category, ee will look at both the companies that are below Altman's 'distress' levels and those companies that have the most significant negative deviation from their seven-year average score. Only six of the bottom-thirty manufacturing and five of the bottom-thirty manufacturing companies have outperformed over one year. Many are already Oversold and offer potential value opportunities -as with Nissan Motor (7201 JP) which is now as distressed as when Carlos Ghosn first arrived.  QUASI-FINANCIAL FIRMS - The Z-Score methodology does not work for financial firms. Accordingly, five non-financial companies which have significant financial subsidiaries -  Rakuten (4755 JP), Z Holdings (4689 JP), Japan Post (6178 JP), Softbank Group (9984 JP) and Sony (6758 JP)- have been excluded from this analysis. 

🇯🇵 JAPAN - Stress Tests Part 1 - Altman Z-Scores

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a>’s share price has increased by around 53% since the first week of April, following the initial COVID-19 jitters. However, we do not believe that the outlook for the next few quarters justifies this recovery. Recruit’s 4Q FY03/20 financial results could pass as decent, however, things could go south for Recruit from this point. We remain bearish as we expect to hear more bad news from Recruit over the next few quarters.

Recruit Holdings (6098 JP)’s share price has increased by around 53% since the first week of April, following the initial COVID-19 jitters. However, we do not believe that the outlook for the next few quarters justifies this recovery. Recruit’s 4Q FY03/20 financial results could pass as decent, however, things could go south for Recruit from this point. We remain bearish as we expect to hear more bad news from Recruit over the next few quarters.

Recruit Holdings: 4Q Results Could Pass as Decent but Things Could Go South From This Point

We believe it is likely for <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> to reach its full-year EBITDA guidance for FY03/20. However, we remain bearish, as we expect Recruit to feel the full impact of COVID-19 from 1Q FY03/21 onwards. Both global and domestic labour markets have weakened since March and the demand for online advertising remains low with the disruption of economic activities.

We believe it is likely for Recruit Holdings (6098 JP) to reach its full-year EBITDA guidance for FY03/20. However, we remain bearish, as we expect Recruit to feel the full impact of COVID-19 from 1Q FY03/21 onwards. Both global and domestic labour markets have weakened since March and the demand for online advertising remains low with the disruption of economic activities.

Recruit Holdings: Likely to Reach Full-Year Guidance but Bad News Could Be on the Way

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

As discussed in <a href="https://www.smartkarma.com/insights/softbank-starts-on-its-4-5trln-capital-plan-a-model-for-bullishness" target="_blank" data-smartkarma-citation="insights:39469" rel="noopener">Softbank Starts on Its ¥4.5trln Capital Plan - A Model for Bullishness</a>, in announcing a sale of $11.5bn of <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> and assuming that a sale of its shares in <a href="https://www.smartkarma.com/entities/t-mobile-us-inc" target="_blank" data-smartkarma-citation="entities:922:1" rel="noopener">T Mobile Us Inc (TMUS US)</a> could be done at the price of 31 March 2020 (which would provide a large discount for a large sale to <a href="https://www.smartkarma.com/entities/deutsche-telekom-ag" target="_blank" data-smartkarma-citation="entities:21611:1" rel="noopener">Deutsche Telekom Ag (DTE GR)</a> and perhaps an additional approved forward sale through a METS structure or collar+forward to the Street), <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> still needed $3bn or more in sales of other assets. And because they are stuck in Vision Fund 1 and have committed to funding Vision Fund 2, that left a partial sale of <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> as the most likely angle. <h2>The NEW News</h2>Today, Softbank Group (9984) <a href="https://group.softbank/system/files/news/en/press/2020/20200521/pdf/20200521_en.pdf" target="_blank" rel="noopener">announced</a> a sale of approximately 240 million shares of Softbank Corp (9434) - roughly 5.0% of shares outstanding - at a price of ¥1,306.5-1,320/share (a discount of 4.0-5.0% to the close today of ¥1,375. It would lower the consolidated holding of Softbank Corp from 67.1% to 62.1%. This loses Softbank Group the super-majority but that had to be expected eventually. This goes the extra little bit to advance the cause of the <a href="https://group.softbank/en/news/press/20200323" target="_blank" rel="noopener">¥4.5 trillion (USD 41 billion) Program to Repurchase Shares and Reduce Debt</a> announced 23 March. Details on the Offering and how it may be taken below the fold.

As discussed in Softbank Starts on Its ¥4.5trln Capital Plan - A Model for Bullishness, in announcing a sale of $11.5bn of Alibaba Group (BABA US) and assuming that a sale of its shares in T Mobile Us Inc (TMUS US) could be done at the price of 31 March 2020 (which would provide a large discount for a large sale to Deutsche Telekom Ag (DTE GR) and perhaps an additional approved forward sale through a METS structure or collar+forward to the Street), Softbank Group (9984 JP) still needed $3bn or more in sales of other assets. And because they are stuck in Vision Fund 1 and have committed to funding Vision Fund 2, that left a partial sale of Softbank Corp (9434 JP) as the most likely angle. The NEW NewsToday, Softbank Group (9984) announced a sale of approximately 240 million shares of Softbank Corp (9434) - roughly 5.0% of shares outstanding - at a price of ¥1,306.5-1,320/share (a discount of 4.0-5.0% to the close today of ¥1,375. It would lower the consolidated holding of Softbank Corp from 67.1% to 62.1%. This loses Softbank Group the super-majority but that had to be expected eventually. This goes the extra little bit to advance the cause of the ¥4.5 trillion (USD 41 billion) Program to Repurchase Shares and Reduce Debt announced 23 March. Details on the Offering and how it may be taken below the fold.

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

After Covid: The Future for Japanese Retail: Winners & Losers

Japan

LY Corporation operates as an internet search engine "Yahoo! JAPAN". The Company provides electronic commerce and settlement finance services for small medium enterprises and individuals. LY also operates media business including search linked advertising and display advertising services.

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LY (4689 JP)

🇯🇵 JAPAN - Stress Tests Part 1 - Altman Z-Scores

STRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through...

Campbell Gunn

Recruit Holdings: 4Q Results Could Pass as Decent but Things Could Go South From This Point

Recruit Holdings (6098 JP)’s share price has increased by around 53% since the first week of April, following the initial COVID-19 jitters....

Supun Walpola

Recruit Holdings: Likely to Reach Full-Year Guidance but Bad News Could Be on the Way

We believe it is likely for Recruit Holdings (6098 JP) to reach its full-year EBITDA guidance for FY03/20. However, we remain bearish, as we expect...

Supun Walpola

Softbank Corp (9434) Block

As discussed in Softbank Starts on Its ¥4.5trln Capital Plan - A Model for Bullishness, in announcing a sale of $11.5bn of Alibaba Group (BABA US)...

Travis Lundy

After Covid: The Future for Japanese Retail: Winners & Losers

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are...

Michael Causton

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